The max documentation states that key is an ordering function, the method gives a new value for each item of the iterable , which will be used for ordering

Without key : natural order

max([4, 3, 5, 6]) 
     4, 3, 5, 6    << values used for finding the max
           ^

With key : order if values given by the key

max([ 4,  3,  5,  6], key=lambda x: -x) 
     -4, -3, -5, -6    << values used for finding the max
          ^

Your case, the list.count, that telles that 2 occurs 2, and that is more than the ones

l =[4, 2, 6, 3, 2]

max([4, 2, 6, 3], key=lambda x: l.count(x))
     1  2  1  1      << values used for max, regarding the
        ^